Another kind of marijuana is stirring up a boom in China’s stock market, industrial marijuana.
The Hui and Yi Autonomous County of Xundian is 100 kilometers north of Kunming, which is the nearest industrial cannabis producing area to Kunming. In early April 2019, large areas of land were empty, and the planting season had not yet begun. In the capital market, these unseeded seeds have been described as mysterious and omnipotent, but the enthusiasm for industrial marijuana has hardly caused any waves here. For local farmers, this is a better crop than weeds, and good sunshine means good harvest.
Cannabis can be divided into industrial cannabis, medical cannabis and leisure cannabis, which contain THC (tetrahydrocannabinol) and CBD (cannabis bisphenol) and other cannabinoid components. THC can bind to CB1 receptor in the brain, which has exciting effect; while CBD has no psychoactive effect, high medical value, anti-spasm, anti-anxiety, anti-inflammation, analgesia and other pharmacological effects. A considerable number of CBD drugs, health care products and cosmetics have been sold in European and American countries. Apparently, industrial cannabis plants are tall, THC values are lower than 0.3%; drug cannabis plants are relatively short, THC content can be from 5% to 30%.
(Autumn 2018, Yunnan Industrial Hemp Harvesting Site)
In 1979, after the Sino-Vietnamese border self-defense counterattack war, the Military Quartermaster Institute launched a new textile fiber research. The local planted hemp (industrial hemp) emerged as a military product because of its characteristics of moisture absorption, air permeability, bacteriostasis and mildew prevention. China is by far the world’s largest producer of industrial hemp fibers and seeds.
In 2010, Yunnan Province formally issued documents to clarify the legitimacy of industrial cannabis. According to the World Intellectual Property Organization (WIPO), 309 out of 606 patent applications for cannabis worldwide in 2017 came from China. Then in 2017, Heilongjiang industrial marijuana was legalized; in 2018, Jilin Provincial Public Security Bureau also made it clear that the industry would be liberalized in an orderly manner.
The magic story of industrial marijuana began to unfold on this land.
Yunnan cannabis, once a small circle
Li Linjing went to Yunnan to grow industrial marijuana from Beijing in early 2015. Before that, she invested in Beijing, but the investment fields and industrial marijuana are not closely related. She invested in the Internet. Today, her Hangu Biotechnology Co., Ltd. is mainly engaged in industrial cannabis cultivation, processing, pharmaceutical R&D and other businesses. The start-up funds come from the first barrel of money she earned from investing in mobile games.
“At the end of 2014, I was still in investment institutions and learned a lot about overseas Internet investment. When I heard that Peter Thiel, the author of “From 0 to 1”, had invested in cannabis, I went to check the overall market situation of cannabis overseas, including the pace of investment. It was only then that overseas investment began. We find that CBD is growing faster than THC. CBD is not addictive or hallucinatory, and can be used as a global market layout.
Li Linjing’s cannabis investment refers to Privateer Holding, a private equity fund focused on cannabis investment. Among its earlier $75 million B round of financing, Silicon Valley venture star Peter Till’s Founders Fund participated. Peter Till is the founder of PayPal and has provided early funding for LinkedIn, SpaceX, Yelp and many other technology companies; his investment in Privateer Holding became a shareholder in Tilray, a Canadian hemp producer and distributor listed in the United States.
When Li Linjing came to Yunnan to join the profession, British Michael Stephenson had been groping here for several years, and his partner was Pan Zongbing. Their Hankang (Yunnan) Biotechnology Co., Ltd. is approved by the Public Security Bureau of the Yi Autonomous County of Emshan, and has the license to process industrial hemp mosaic leaves. Hemp mosaic leaves can be extracted from CBD. This license is the first of only six in Yunnan, and Hankang is the first enterprise to join this industry in China, mainly for export.
Pan Zongbing did research and development of medical and cosmetic instruments in his early years. In 2008, he had an occasional opportunity to listen to British customers talk about the raw material of new instruments in the cosmetic industry is CBD extracted from cannabis, but the technical problems of industrialized production and purity of such materials have not been solved, which is exactly what Pan’s old line may solve.
In 2010, Yunnan industrial cannabis cultivation was included in the legal scope, Pan Zongbing immediately invested in the quantitative extraction of CBD. In 2014, technical problems were solved and patents were registered successfully. In 2015, the industrial production line was completed. In October of that year, the first batch of 100 kg CBD with 95% purity was exported abroad. This is also the first batch of CBD produced by industrial extraction in China.
The growth cycle of industrial cannabis is about 110-130 days, and the income per hectare exceeds 10,000 yuan, which is higher than that of common crops. Yunnan is the most suitable cultivation area for industrial hemp. It has been planted on a large scale in Yuxi, Honghe, Wenshan, Chuxiong, Lijiang, Baoshan, Qujing and Xishuangbanna.
Like Pan Zongbing, people in the pharmaceutical and health care industries were the first to notice investment opportunities, such as Hammussen. Hanmusen officially obtained the processing license of industrial hemp mosaic in Zhaotong City, Yunnan Province in June 2016.
Hankang, Hanmusen and Hansu (hemp), the small circle formed by these companies with processing licenses, almost represents the whole processing capacity of Yunnan industrial hemp mosaic. Li Linjie’s Hangu Biotechnology finished the pre-approval and pilot-scale production a little later than they did. The stigma materials harvested from 2000 mu of industrial hemp planted last year are being stored in the warehouse.
Overnight, enclosure became popular < br > < br > but until 2018, the business circles formed by these companies were obscure.
“Prior to 2018, the industry was dominated by individual investment, and after 2018, by listed companies, it basically crossed the stage of venture capital,” said Li Linjing. In the early stage, no one was interested, and the organization was interested in it, but it was cautious to wait and see the end. I have visited more than 50 institutions, mostly professional medical and pharmaceutical funds. The cost of communication is too high. One by one, I have to talk for more than three and a half hours at a time. Institutions are mainly concerned about policies and market ceilings. Recently, the capital boom has been developing rapidly. We can only say that capital is the best propaganda when we directly enter the hot spot of speculation and mergers and acquisitions.
In those years when no investment institution joined, Li Linjie and her partners increased their investment little by little and planted industrial hemp for four consecutive years, 2000 mu per year. In Yunnan, the market price of mosaic leaves is about 20,000 yuan per ton, including 8-9 kg of CBD. There will be loss in extraction. In the second half of 2018, Li Linjing located the new plant in Shizong County, Qujing, Yunnan Province.
However, just before the purchase of equipment to build production lines to invest the largest amount of money, the capital market is in full swing. Therefore, in 2019, she did not intend to plant it herself, and signed an agreement to entrust her colleague, Yunnan Muya, to plant 5,000 mu of industrial hemp. But crazily, she felt that the limited-profit planting sector was flooding into a super-many of her peers.
The whole Yunnan industrial hemp industry seems to be only one night apart from the lack of people to scramble for contracts and enclosures.
In Zhanyi County, Qujing City, Yunnan Province, before the planting season, Fang Huarong, chairman of Ximeikang Company, came to Yanfang Township and other places to shout to 160 farmers: “2019 will be the key year for the development of Ximeikang Company. The company plans to enter a new field in 2019 – the development of industrial cannabis cultivation. 160 household farmers will greatly increase their income channels through industrial cannabis cultivation on the basis of Ginkgo cultivation.
(Hanma Group in Yunnan Industrial Cannabis Planting Area)
Ximeikang was granted a planting license on Jan. 24 this year, with an area of 5,000 Mu and seeds of Yunma No. 7. It is also a second-level subsidiary of Connbey Group. Two other brothers, Luxi Xikang, have been granted 5,000 Mu and Sinokang 14,000 mu.
Thus, in 2019, the KangEnbei family laid 24,000 mu of industrial hemp circle, exceeding the planting area of Yunnan in 2018. KangEnbei’s family apricot biotechnology hopes to obtain processing license through the transformation of the existing production line. Currently, it has received the application and approval letter from the local public security bureau, but has not yet obtained the formal processing license.
Not only KangEnbei, but also the industrial cannabis planting sector is “blooming everywhere”. In January, Shunhao subsidiary company received the planting license issued by Qujing Zhanyi. In February, Longjin Pharmaceutical Company increased its capital to Yunnan Muya Agricultural Science and Technology Co., Ltd. with its own capital not exceeding 15 million yuan, accounting for 51% of the shares, and became the controlling shareholder of Muya. Established in 2016, Yunnan Muya is the company entrusted by Li Linjie to cultivate Hangu Biology. In 2018, Muya planted more than 3000 mu and planned planting area exceeded 10,000 mu in 2019. Fangsheng Pharmaceutical Co., Ltd. signed a cooperation framework agreement with the Huize County Government of Yunnan Province. It will invest 1 billion yuan in the next eight years to establish a planting base for traditional Chinese medicines, industrial hemp and a deep processing base in Huize.
Similar to the above companies, there are more than 40 planting licenses in Yunnan; more rare are mosaic processing licenses, which are sought after by the capital market. From 2018 to 2019, there was a surge of requests for cooperation from Hanma Group, the same company.
Crazy CBD, Crazy Cooperator
(Crystal CBD, different extraction processes and solution types affect purity)
In a year, Tan Xin may have to fly a hundred times. Before, she was looking for investment, but now she is invited for various cooperation and industry activities. Tan Xin is the chairman of Hanma Investment Group and the only whole industry chain enterprise in the field of industrial hemp in China. In recent months, he has experienced more magical ups and downs.
Hanma Group has not landed in the capital market. The major shareholder is Hanzhong Enterprise Management Group Co., Ltd. The shareholder is Zhang Kehe Cheng Xi and Cheng is Tan Xin’s wife. Tan Xin, a Hunan native, is a diplomat of family background. She has joined the army and stayed in school. In her early years, Tan Xin did the business of hemp fibre, supplying clothing raw materials to the army. This kind of fibre has natural bacteriostatic effect. Zhang Ke and Tan Xin’s current industrial cannabis business will start in 2015. They are looking at the application of CBD in the fields of medicine, health care products and food.
For the wave of industrial marijuana market, Tan Xin said: “As early as three or five years ago, I said that Americans call it crazy CBD, what does crazy mean? In fact, it is reflected in the capital market, at that time, everyone has already known. In fact, this round is reflected in China.
In a crazy industry, Tan Xin said he was cautious and had a low risk appetite. In 2016, Hanma Group established Yunnan Hansu Biological Extraction and Separation Base for Industrial Cannabis, which can extract oily and crystalline CBD and thirteen other components. In 2016 and 2017, Hansu Biology’s business income (unaudited) was 49.395 million yuan and 47.185 million yuan respectively, and its net profit was – 1.04 million yuan and 20.2815 million yuan respectively. In the first half of 2018, Hanma Group’s net profit commitment to Hansu Biology was not less than 39 million yuan in 2018 and 50 million yuan in 2019, respectively.
Hanma, Hansu and Hanlong are frequently listed in a series of cooperation lists. Hanliang is the second phase of industrial cannabis processing project. In September 2018, Hanliang received the pre-approval of the local public security department. It is expected to be put into operation by the end of 2019 after the completion of plant infrastructure, equipment installation and approval of formal mosaic processing license. Galaxy Biology and Merrill Health have invested in Hansu Biology separately; Chengzhi Share has become the controlling shareholder of Hansu League through capital increase; Luxin Electronics under Shunhai Share, and Hansu has established a joint venture company Hanshin Electronics.
Tan Xin could not talk about cooperation two years ago. After the recent company’s valuation had increased several dozen times, she was able to talk about it. “There are many examples of regret. But they think it’s time to tell shareholders about the legitimacy of cannabis. At this stage, even if it is expensive, they still have to vote. They have their considerations.
The exposure of high-frequency words has made Hanma famous and put a lot of pressure on management. Tan Xin was hurt by comments like “one daughter, two marriages”. “In fact, so many listed companies have cooperated with us in this round. To tell you the truth, we did not cash in to get rid of people, but did something in an industry.” In the planning, the diversified territory of hemp needs to be realized by partners.
In terms of breeding and planting, two companies, Yunnan Suma Biology and Heilongjiang Hanzheng Hemp, have been established by Hanma investment. Medical CBD high content variety “Hanma No. 1” has entered the breeding stage. In terms of extraction, Yunnan hansu, cannabinoid drug research and Hanyi biology, and consumer goods, the company signed a joint venture agreement with BlueSky Company of Canada to develop and sell pet health products. Hanma is listed in KRB Company of the United States at the price of extraction technology. The extraction plant invested in Nevada is expected to start production in 2019.
Tan Xin said: “This plant has too many application scenarios, but ultimately I will not give up the biopharmaceutical sector, the rest I will share with you to do together. We have extracted more than a dozen single compounds from industrial cannabis, each of which has its merits.”
The closest commercial biopharmaceutical product of hemp is the new anti-epilepsy Chinese medicine “cannabis polyphenol tablet”, which is a neutral project in the major pharmaceutical research and development project of “ten diseases and ten drugs” of Beijing Science and Technology Commission. In the international market, anti-epilepsy of CBD components is also an important medical use.
In June 2018, FDA approved Epidiolex, a drug produced by GW Pharmaceutical Company, for the treatment of rare epilepsy in children over two years of age (Lennox-Gastaut syndrome and Draview syndrome). Epidiolex is a oral liquid containing high purity CBD. It contains only trace psychoactive element THC and does not cause emotional excitement. This is the first batch of drugs containing cannabis ingredients approved for use in the medical field.
From abroad, China is still “excited” < br > < br > He Ting came to the United States with his family at the end of 2015, and has been engaged in the financial industry at home until then. After Nevada could legally grow cannabis with high THC content in 2017, He Ting purchased four licenses from others and began to build factories to grow THC by himself; CBD processed it into market-oriented finished products by purchasing raw materials.
On December 20, 2018, President Trump signed the Agriculture Act of 2018, removing cannabis with THC content less than 0.3% from the “Controlled Substances Act” and legalizing industrial cannabis across the United States. As of February 2019, medical marijuana was legalized in 33 states in the United States, 10 of which also legalized leisure marijuana.
In 2018, Mike Tyson, a former heavyweight boxing champion, became a new California marijuana entrepreneur. Farms near Edwards Air Force Base, California, grow not only cannabis, but also food factories and extraction facilities to study how to improve the effectiveness of cannabis as a drug. The farm covers an area of about 40 acres, where the guards are made up of veterans. Jennifer Wood, Mayor of California City, also came to thank Tyson for his commitment to the community, which will provide medical marijuana to those in need and bring taxes, jobs and income to residents.
(Boxer Tyson wants to grow marijuana)
In the United States, the average CBD content of industrial cannabis seeds is about 6%, the highest state can reach 11%, and 15 pounds of industrial cannabis raw materials can be extracted to 1 pound of CBD. In contrast, the CBD content of Chinese seeds was higher about 1.3%, with an average of 1%.
However, in China’s policy environment, the issue of CBD content should be considered comprehensively, because the THC value of industrial cannabis must be less than 0.3%, while CBD is the isomer of THC, and the content of CBD is related. The latest variety improvement was in September 2018. The Institute of Economic Crops of Yunnan Academy of Agricultural Sciences completed the selection of all female varieties. Five mu of flax was planted in Songming Research Base. The percentage of female flax was over 98%, the content of CBD was over 2.09%, the content of THC was only 0.14%, and the yield of mosaic leaves increased by 22% compared with dioecious plants.
The demand for CBD in the United States is increasing year by year. CBD is widely used in the United States and Canada. There are CBD products such as oil, sugar, food, medicine and cosmetics for special purposes. In Yunnan, the cost of 95% CBD from planting to processing is about US$3500-4000 per kilogram; in the United States, it can be reduced by about 40%.
From 2017 to 2018, industrial cannabis was distributed in 19 states, with the largest production in Colorado, Kentucky, Virginia, etc. 70% of industrial cannabis was used to extract CBD, 20% to harvest seeds, and the remaining 10% to be used as industrial fiber.
In 2018, the United States, Argentina, Australia, Austria, Chile and other 35 countries have legalized medical cannabis, while the United Kingdom, France, Belgium, New Zealand and other nine countries have legalized some medical cannabis drugs. The United Nations Commission on Narcotic Drugs will also discuss pure CBD and CBD preparations that will not exceed 0.2% THC and will not be included in the international drug control conventions in any way, which is expected to promote the legalization of global industrial cannabis. According to Brightfield Group, a CBD Market Research company, the value of the global CBD industry will reach $5.7 billion in 2019 and $22 billion in 2022.
China’s market is still in an “exciting” state because of the rise of industrial marijuana concept stocks from the end of last year to the beginning of this year. By contrast, after a series of IPOs and speculation in the US market last year, market sentiment gradually returned to calm.
Canopy Growth Corporation is a diversified cannabis company, providing different brands of dried cannabis, cannabis extract, soft capsule products. The company was listed on the Toronto Stock Exchange in 2014, the first publicly traded marijuana company in North America, and landed on the New York Stock Exchange in May 2018. It was the first company to establish a strategic partnership with Fortune 500 beverage suppliers; in the first three quarters of 2018, it had achieved revenue of $1.78 million, but suffered a loss of $267.27 million due to rising costs.
On the other side of the ocean in China, the company let “distant relatives” Huazhi Wine Company ignorant of the gains and losses, only because the American wine giant constellation Group invested Canopy Growth to develop cannabinoid drinks, and Huazhi Wine Company acted as a representative of the constellation group’s wine.
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